Crude Oil-
It is the dangerous time of year for shorts. All over the producing region they are reducing exports because of local electrical usage for air conditioning. August and September are the time when hurricanes stop production in the Gulf of Mexico. So the potential is there for a "surprise" draw down.
Refineries are continuing to produce at record levels, they clearly have added capacity. Go look at Kemp's charcutepalooza to see for yourself.
https://twitter.com/JKempEnergy?ref_src ... r%5Eauthor. News to me is that 17% of US production is going to Brazil. Without exports the US would be totally drowning in product because local demand is flat as a pancake as Bank of America Merrill Lynch recently pointed out. The possible problem for bulls is the rest of the producers are playing the same game with exported products, including China, so any future OPEC cuts will result in yet another ramp up of refining as a way around the restrictions. So it is possible that this winter Goldman will again warn that storage in the Rotterdam area is running out.
US shale producers are receiving overtures from OPEC but the media is focusing on the truth for once. Remember the famous speech that Stan Druckenmiller gave to a private club in the Miami area a couple of years ago? The one with the great quote along the lines of " I've never met an oil man who wouldn't drill a hole with other people's money". Well the media has figured out that Wall Street money is the only way to control shale. Never ever forget that the Fed is watching the oil patch loans very carefully working the system to try and get paid off before another collapse because the FOMC does not want to go to Congress for yet another bailout. So Wall Street is the source for fresh money and these firms have the kind of cash flow problems that only Elon Musk could understand. Where the media focus is wrong is drilling activity. The real measure is the Drilled Un Completed, the DUC's and that number is increasing. So while there is a big lag between an increase in rigs working and production increases it isn't the same with the DUC's inventory. Why bring this up? Because the narrative is that they haven't done a good job of selling 2018 inventory and the bankers in particular as well as Wall Street want to see those payments covered, at a profit or otherwise. So you can pretty much count on any price spikes being met with selling from the shale patch.
What about our favorite 28 year old ivy league history majors managing other people's money? Well over the forth when they were renting party pads in the Hamptons after rolling their positions from long to short the big trading houses, er I mean market forces put on the squeeze. Kemp has a great long term chart showing net ratio of specs long to short in combined contracts and it is super clear that there is a line that the market does not want violated. So we wait to see what they do, stay short or take their losses and move on.
All in all the fundamentals for the fall season are a muddle with an underlying trend to oversupply. The OPEC jaw bone is no longer affecting prices, but who knows for how long. The seasonal trend is for occasional weekly inventory surprises, so count on the Algo's using those to run stops. The larger specs that move the market as a group are at a crossroads. The shale patch needs to sell inventory to make the bank payments. So between the oil market and a new season of Game of Thrones it should be an entertaining fall.